As a business owner, you have the responsibility and discretion to make many kinds of purchases. Did you see a deal on office supplies on Amazon last week? Buy a fun item for your personal collection on eBay? Decided to purchase a group of gift cards or promotional items to use as employee perks or customer giveaways? There are so many great deals out there, but…. Have you thought about what needs to happen after you hit the ‘buy it now’ button?
In the last two years, online purchasing through these two sites has soared among the general population, and that includes business owners. But, chances are, these purchases are hitting your pocketbook harder than you think. By their nature, these purchases show up as Amazon or eBay charges on your bank or credit card statement. If you have not supplied the detail to your bookkeeper, these charges will likely go against ‘owners draw’. The result: you will be paying personal income taxes on items you have purchased for the benefit of the business. Thousands of dollars can get added to your taxable income!
How can you avoid this debacle? It’s simple; institute a communications system of some sort to provide the detail of each purchase, so there is a written record for you bookkeeping and accounting staff to use. We are only as good as the paper trail you are willing to create in your business. Here are some suggestions:
- Set up a separate email account dedicated specifically for use with online purchases. You will then be able to give access to your bookkeeping staff, and the email history will contain the detailed receipts for each online purchase. This creates an intact paper trail that is searchable and easy to maintain.
- Institute a Purchase order system with a prefix number to identify the online purchases, and use this to create a PO for every purchase. Then, your staff will know the detail and will be able to classify the transaction accordingly.
- Lastly, if you have only a few transaction, you can simply make sure the packing slip for each purchase is given to the bookkeeping staff immediately, with any pertinent notation on it.
Whichever suggestion you implement, be sure to be vigilant in following through for every transaction! This is your money we are talking about- and there is no need to tip the government more than required!
As always, the team at YourQBGuru is thinking every day about important information we can pass on to our business owners. We know that keeping your books in the best possible shape requires detail on every transaction, and we want to partner with you to make this happen!
All the best,